On-Demand Pay: Easing Employees’ Monetary Stress And Improving Financial Wellness

How people are paid have not kept up with the time

American employees of all income levels are facing financial stress. A recent Gallup poll found respondents’ top concerns are paying their monthly bills, maintaining their standard of living and doling out earnings for mortgage or rent. 

Their financial worries are understandable, with inflation at 8.6%, a 40-year high, and nationwide gasoline prices hovering around $5 per gallon. Plus, short-term interest rates tripled their usual amount, hiked by 0.75%, which is the most the Fed has raised them in 28 years.

These concerns trickle down into the workplace – employees in financial duress are not as productive or engaged as they could be. As such, human resource leaders should be on the hunt for innovative programs and solutions to help ease workers’ worries and support their financial journeys in productive ways. 

This could include financial wellness programs that provide savings and spending planning advice. It could also incorporate a modern payment solution enabling employees access to their earned wages before a traditional payday.

In today’s on-demand society, the manner and frequency in which people are paid have not kept up with the times. This is something HR should strongly consider exploring and updating, as upgrading to a more flexible payroll process not only helps employees’ financial health but helps employers attract and retain the best talent. 

On-Demand Pay Benefits All Income Levels

Consider the financial struggles of many Americans: 
 

• While the number of U.S. households that have access to a bank account has steadily risen in the last decade, approximately 5.4% of American households remain unbanked, according to the Federal Deposit Insurance Corporation’s (FDIC’s) How America Banks: Household Use of Banking and Financial Services report. Further, while wages are rising across the United States, 61% of Americans live paycheck to paycheck. 

 

• Financial challenges are not just impacting lower-income earners. The February 2022 New Reality Check: The Paycheck-to-Paycheck Report found 42% of consumers earning more than $100,000 annually lived paycheck to paycheck in December 2021, an increase from 39% in May 2021. They are not only challenged to pay monthly bills but would have trouble covering an emergency expense of $400.

 

• PwC’s “Employee Financial Wellness Survey” found 63% of employees saying their financial stress has increased since the beginning of the pandemic. Among those with money-related anxiety, nearly half (49%) said their mental health has been adversely affected, including 41% citing on-the-job productivity challenges, along with declining engagement and attendance. Further, 42% of this group is twice as likely to be looking for a new job.

Therefore, helping employees work toward financial wellness should be top of mind with HR professionals. 

Today’s Earners Don’t Want to Wait for Payday

Financial freedom and flexibility are increasingly important for today’s consumers. The prevailing thought process for many is, ‘It’s my money, I earned it, so why is my employer holding onto it for two weeks or more?’ And technology and business processes have evolved to match today’s on-demand world – with the exception of payroll. 

People can click an app or swipe a card to get everything from a rideshare to a meal, yet many are still only paying their employees every two weeks. 

One of the most common arguments for changing paycheck frequency is that the old system leaves workers financially frazzled. More regular payroll frequency provides employees with greater flexibility and control over their personal finances, allowing them to handle any unexpected expenses or jump on a limited-time discount on a purchase they have been planning without having to wait up to two weeks for payday to roll around. 

However, earnings on demand, also known as on-demand pay or earned wage access (EWA), allows employees to access a portion of their pay right after working a shift, increasing their financial flexibility and wellness. Plus, it matches the needs of today’s on-demand world.

For employers, EWA eliminates the costs associated with payroll, such as printing and mailing checks. Better yet, it can help companies become an employer of choice by better attracting and retaining employees – standing out from the competition.

Equality of Pay, Regardless of Amount Earned

EWA provides pay equity and an equal financial playing field. Whether available for banked, unbanked or low-, middle- or high-income earners, on-demand pay solutions help employees avoid stress for both everyday transactions and special occasions, such as purchasing tickets to a game or taking their family out for a celebratory meal. 

In the near future, some on-demand solutions will enable peer-to-peer transfers, offer rewards and points like credit cards and enable companies to give out spot bonuses or load money allocated toward a certain perk. Workers can use such a bonus to purchase a seasonal gift, such as a Thanksgiving turkey from their employer. Further out, we might even see EWA replace conventional banking. 

Get in Tune with the Modern Way to Pay

The benefits of on-demand pay in an on-demand world are undeniable. Financial stress due to inflation and rising prices is prevalent among hourly and salaried employees. Gaining access to their pay immediately after working – and without having to wait for payday – can help employees tackle their bills and get one step closer to financial flexibility and freedom. In addition, EWA decreases employers’ costs associated with payroll, enables them to provide a much-desired benefit to help attract and retain top talent, and is often available at no cost to employers or employees.

The payments’ technology is there – it just has not caught up as quickly as other on-demand solutions like Uber, DoorDash and PayPal. So, if you are an HR leader who is interested in doing away with antiquated payroll cycles and getting in tune with the times, EWA is the way to pay today. 

Brian Brinkley is the CEO of QRails.